Money makes the world go round according to new research

It is often said that money is the root of all evil and creates rancour, jealousy and distrust, but new research has indicated that it may in fact be the basis of co-operation in larger societies.

A scientific team led by Professor Gabriele Camera, from the Economic Science Institute at Chapman University in Orange, California, demonstrated that money overcomes the fragmentation of trust and community as societies grow by creating an abstract medium through which to build links and encourage people to work to a larger goal. The underlying assertion is that industrialised societies may never have developed without money as the glue that held them together.

‘This study has identified a behavioural reason for the existence of money. Our research suggests that norms of voluntary co-operation are difficult to use in a society of strangers, unless they are mediated by some institution”, wrote the researchers.

The study involved 448 volunteers playing a ‘helping game’ designed to examine the impact of money. In one of a series of experiments, participants could choose whether or not to offer ‘help’ to fellow players in the form of gifts of ‘consumption units’ (CUs). This system effectively recreated the idea of a barter economy, but it only worked when groups were small and individuals dealt with each other on a personal basis.

Co-operation fell from almost 80 per cent in groups of two to 49.1 per cent in groups of four, 34.2 per cent in groups of eight and 28.5 per cent in groups of 32.

But where it gets really interesting is with the introduction of worthless tokens. Volunteers instinctively started using the tokens as ‘money’ - rewarding help with a token or demanding one in exchange for help. With tokens, the average rate of co-operation remained a constant 52.1 per cent even when groups increased in size.

Professor Camera said: 'In the experiment, monetary exchange, one of the most basic economic institutions, emerged endogenously and supported a stable level of co-operation in small as well as large groups. Inherently worthless tokens acted as a catalyst for co-operation, acquiring value because of a self-sustaining belief that they could be exchanged for future co-operation.’

But before we all start singing the praises of hard cash, the dark side was also on display ‘Once the convention of money took hold, participants replaced norms of voluntary co-operation with a norm of exchange, i.e. trading co-operation for a token, quid pro quo,’ said the researchers.

‘This damaged co-operation whenever monetary trade was unavailable.’

So money facilitates the unification of large societies but only on a self interested basis. Fascinating to see it’s dualist nature play out under research conditions.